Apyx Medical Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 11, 2023

There are 5 speakers on the call.

Operator

Hello, and welcome, ladies and gentlemen, to the First Quarter of Fiscal Year 2023 Earnings Conference Call for Apyx Medical Corporation. We will conduct a question and answer session. Please note that this conference call is being recorded and the recording will be available on the company's website for replay shortly. Before I begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including without limitation, those identified in the Risk factors section of our most recent annual report on Form 10 ks, our most recent 10 Q filing and the company's other filings with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website.

Operator

We undertake no obligation to publicly update or revise our forward looking statements as a result of new information, future events or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these non GAAP financial measures. Reconciliations of those non GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. I would now like to turn the call over to Mr.

Operator

Charlie Goodwin, Apyx Medical's President and Chief Executive Officer. Please go ahead, sir.

Speaker 1

Thanks, operator, and welcome, everyone to our Q1 2023 earnings call. I'm joined on today's call by our Chief Financial Officer, Tara Sem. Let me provide you with a brief outline of what we intend to cover today. I'll begin with a review of our revenue results and the factors that contributed to our sales performance in the Q1. I'll then share an update on our and operational progress made during the Q1 and in recent weeks.

Speaker 1

Tara will discuss to our Q1 financial results in detail as well as our financial guidance for 2023, which we updated in our earnings release today. I'll then conclude with some additional thoughts on our outlook and strategic priorities for the remainder of 2023 before we open the call with questions. With that, Let's begin with a review of our Q1 revenue results. In the Q1, our total revenue decreased 3% year over year to $12,100,000 exceeding the high end of our expectations that we shared on our Q4 earnings call by approximately $900,000 Our Stronger than anticipated total revenue performance was largely driven by Advanced Energy sales, which decreased 10% year over year to $9,700,000 exceeding the high end of our expectations by approximately $700,000 OEM sales increased 46% year over year to $2,500,000 and approximately $200,000 higher than we had anticipated. Looking ahead at our Advanced Energy sales performance in more detail.

Speaker 1

As anticipated, during the Q1, we continued to experience disruption and global sales of our advanced energy products due to the medical device safety communication that was posted by the FDA in March of 2022. The 10% decrease in sales in our advanced energy products was driven by global sales of generators and handpieces, which both decreased by more than 10% year over year. While the year over year decrease in global handpiece sales was largely consistent with the trends observed In the Q4 of 2022, we were pleased to see notable improvement in global generator sales trends in Q1. While global generator revenue declined year over year, the trends improved materially when compared to the nearly 50 In terms of our advanced energy performance in the U. S, we were pleased to see sales of our advanced energy products in the U.

Speaker 1

S. Increase by nearly 10% year over year with sales of our U. S. Generators increasing by approximately 40% year over year. Our generator sales performance in the U.

Speaker 1

S. Benefited from the introduction of our APYX-one console, our next generation generator, which we launched in late January. In connection with the launch, we introduced an upgrade program for all of our existing U. S. Users, enabling them to trade in their prior version of our Renuvion generator and receive our Apex 1 console at a discounted rate.

Speaker 1

We were pleased with the initial demand we have seen from our existing users, which exceeded our expectations in the quarter and drove the majority of our outperformance that we saw versus our expectations. While sales of Our generators to new customers continued to remain paced by the confusion related to the safety communication. We were also pleased with the initial sales of our APYX-one console to new customers as well, which modestly exceeded our expectations. With respect to our advanced energy sales outside the U. S, International generator sales decreased by more than 60% year over year, which was modestly below what our guidance range had with weaker demand from distributors in key countries, most notably Europe and the Asia Pacific region.

Speaker 1

Our international sales results were moderated somewhat by more modest declines in sales of our handpieces. In summary, despite the continued headwinds related from the safety communication, which were largely consistent with our expectations for the Q1, we were pleased to drive stronger than anticipated sales of our Apyx 1 console both to existing and new U. S. Customers. This helped to partially offset the impact of disruption as regulatory and clinical teams continue to work to address the remaining limitations of the safety communication.

Speaker 1

Shifting to a discussion of our operational performance. During the Q1, we were pleased to achieve strong progress with respect to our regulatory strategy, while raising awareness of our recently obtained clinical indications, including our next generation generator and securing additional capital to strengthen our balance sheet. Let me discuss each of these in turn beginning with our regulatory strategy. During the Q1, our regulatory and clinical teams remain focused on securing FDA 510 clearances for specific clinical indications to expand our ability to market and sell our Renuvion technology and address the remaining limitations of the safety communication. Following our submission of a 510 application at the end of 2022, We were pleased to receive clearance in late February for a new clinical indication related to the use of our Renuvion APR handpiece for the contraction of soft tissue, including subcutaneous tissue where needed.

Speaker 1

This clearance provides important support for our safety and effectiveness of Renuvion when used for this purpose anywhere on the body. We also completed and submitted our request for additional 510 clearance to obtain an indication for the coagulation of subcutaneous soft tissues following liposuction for aesthetic body contouring. Our five 10 ks submission was supported by a comprehensive portfolio of clinical and real world evidence demonstrating the safety and efficacy of our Renuvion APR handpiece when used following liposuction procedures, which included data from our IDE clinical study in skin laxity and treatment data from more than 4 80 patients in 11.80 areas of the body. As a reminder, an analysis we conducted This data to real world evidence for liposuction treatments gathered in a literature review showed that the use of Renuvion procedures following liposuction procedures demonstrated no new or increased risk when compared to liposuction procedures alone. With this as a backdrop, on April 28, we were very excited to announce that we received clearance for this indication.

Speaker 1

With the receipt of this 510 clearance, The Renuvion APR handpiece is now the only device on the market with a 510 clearance for use following liposuction. As we have stated previously, we believe this indication directly addresses the remaining limitations of the safety communication as last updated on July 21, 2022, specifically the language stating that the Renuvion APR handpiece has not been cleared for the use in combination with liposuction and advising against the use of our technology in combination with liposuction. To that end, we were pleased to receive confirmation that the FDA posted an update to the safety communication on May 10, 2023. This update was intended to inform consumers and healthcare providers about the Clearance of the Renuvion APR handpiece for use under the skin in certain procedures intended to improve the appearance of begin, including for coagulation of subcutaneous soft tissues following liposuction for Aesthetic Body Contouring. The update included revised recommendations for consumers as well as revised recommendation for healthcare providers, the latter of which highlighted 3 new specific indications for our Renuvion APR handpiece, including for Soft tissue contraction where needed, following liposuction for aesthetic body contouring and for dermatological and aesthetics procedures to improve the appearance of black skin.

Speaker 1

They also highlighted the new specific indication for our Renuvion dermal handpiece for treatment of moderate to severe wrinkles and rye tides. Importantly, the updated safety communication also included the FDA's intention to continue to monitor reports of adverse events for other minimally invasive soft tissue heating devices in aesthetic skin procedures and work to ensure that consumers and healthcare providers are informed about the intended uses of these devices. We believe that the May 10, 2023 FDA update to the safety communication addresses the issues set forth in the original safety communication from March 14, 2022. I am extremely proud of the hard work and dedication to our strategy from our clinical and regulatory teams in the time since the safety communication was posted in March of 2022. Without their efforts, the significant progress we have made since that time would not have been possible.

Speaker 1

In addition to our recent regulatory progress, we continue to raise awareness of the 2 specific clinical indications that we obtained in 2022 for the root use of our Renuvion and to improve the appearance of lax or loose skin in the neck and the submental region. We commenced the U. S. Commercial launch for these indications at the beginning of January, which was accompanied by This is Me, our first direct consumer brand campaign. This is Me is a nationwide integrated brand campaign that includes a new patient focused website, brochures and online videos, new social media content and digital advertising across multiple platforms.

Speaker 1

The overarching goal of this campaign is to grow the awareness of our technology and its potential to help people achieve the results they are looking for through a minimally invasive procedure while preserving the defining physical features that make them who they are. In addition to the response and feedback we have received from our surgeons and patients, we continue to be which continue to be very positive. Our integrated campaign has generated millions of impressions to date and we have seen an increase in our total social media engagement. We have also continued to see new mentions of our technology across various media outlets, including magazines like Marie Claire and New Beauty. And on TV, a procedure with Renuvion to correct a patient's time series channel series, The Balancing Act that included an interview between show host Montel Williams and the performing surgeon to discuss the procedure.

Speaker 1

Although we remain in the initial months of our campaign and launch, we have been very pleased with the response we have seen so far. Turning to an update of our new Product Innovation, at the end of January, we were pleased to begin the U. S. Commercial launch of the Apyx 1 console. As a reminder, this next generation version of our Renuvion generator was redesigned to enhance its functionality and ease of use and improve the overall user experience for our surgeon customers.

Speaker 1

Its enhanced features include touch screens featuring new and intuitive user interface, presets for specific procedures and areas of the body, an advanced gas system that measures and monitors gas volume and usage and new cloud connectivity features, including the ability to log and share data, install updates and troubleshoot the device remotely. The Apyx 1 design and features were developed in collaboration with a team of surgeons and informed by feedback of our customers. We believe the benefits of this user centric approach to product development are reflected in the positive initial feedback we have garnered from both new and existing users of our technology. As I mentioned earlier, we have been pleased with the initial market response to our APeX-one console from a commercial standpoint as well, which contributed to our stronger than anticipated sales performance in the Q1. Based on the promising initial response we have seen, We look forward to drive the adoption of our new generator system to both new and existing surgeon customers as we progress through 2023.

Speaker 1

During the Q1, we were also pleased to see new clinical and academic publications discussing the use of our Renuvion technology in cosmetic surgery procedures. In January, our technology was featured in multiple chapters of a new textbook focused on body contouring procedures titled The Manual of Cosmetic Surgery and Medicine. The publication features a chapter dedicated to the use of our technology in body contouring and the use of our technology in combination with liposuction is referenced in additional chapters. We were pleased to see Renuvion described as one of the best technologies to date in skin tightening. And on March 8, we saw a new clinical article published in the peer reviewed Aesthetic Surgery Journal.

Speaker 1

The article summarized the methodology and the results of our multi site IDE clinical trial to evaluate the use of Renuvion to improve the appearance of loose skin in the neck and submental region and was authored by the investigators that conducted the trial. These are just a few recent examples of the growth we continue to see in the body of clinical and academic support for our technology. Lastly, we completed our sales performance and operational progress during the Q1 by completing multiple initiatives to improve our operating efficiency and secure additional capital to further strengthen our balance sheet. In January, we implemented a series of measures to better align our operating expenses with our anticipated needs and priorities. These measures included the consolidation of our handpiece assembly lines in Clearwater, Florida without impacting our ability to serve our current and future customers.

Speaker 1

In February, we entered into a new 5 year agreement with MidCap Financial for a credit facility of up to $35,000,000 consisting of a revolver and a term loan, which provided us with approximately $8,100,000 of net proceeds at closing. Subsequent to quarter end, on May 8, we completed our previously announced sale and leaseback transaction for our Clearwater property, providing us with approximately $6,600,000 in proceeds, net of commissions, expenses, taxes, 1st month's rent and expense fees and a security deposit equal to 1 year's rent expense. And we are still waiting to receive the cash tax refunds of at least $7,500,000 from the IRS, which were approved by the IRS in January. Stepping back with more than $16,000,000 of cash on our balance sheet at quarter end, along with the $6,600,000 of net proceeds received via our recent sale and leaseback transaction, our anticipated cash refunds and the potential capacity under our credit agreement, we continue to believe we have ample liquidity to support our near term operations and growth initiatives. In tandem, we remain focused on driving progress to achieve our longer term goals of sustainable profitability and strong free cash flow generation.

Speaker 1

With that, let me turn it over to Tara to review our Q1 financial results and 2023 guidance, which we updated in today's press release. Tara?

Speaker 2

Thanks, Charlie. I will begin my review of our Q1 financial performance at the gross profit line since Charlie covered our revenue results. Gross profit for the Q1 of 2023 decreased $600,000 or 8 percent year over year to $7,600,000 Gross profit margin was 62.4% compared to 65.8 percent in the prior year period. The decrease in our gross margin was driven primarily by changes in the sales mix between our two segments with our OEM segment comprising a higher percentage of total sales and product mix within our Advanced Energy segment. These headwinds to our gross margin performance were partially offset by geographic mix within our Advanced Energy segment with domestic sales comprising a higher percentage of total sales.

Speaker 2

Operating expenses decreased by $900,000 or 6 percent year over year to $13,200,000 The decrease in operating expenses year over year was primarily driven by professional services expenses, selling, general and administrative expenses and salaries and related costs, which decreased by $500,000 $200,000 and increased $260,000 or 4 percent year over year to $5,600,000 Total other loss net increased $161,000 to $188,000 Income tax benefit was $2,300,000 compared to an income tax expense of $70,000 in the Q1 of 2022. Net loss attributable to stockholders was $3,500,000 or $0.10 per share compared to $5,900,000 or were $0.17 per share for the Q1 of 2022. Adjusted EBITDA loss for the Q1 of 2023 was $4,000,000 unchanged compared to the prior year period. As a reminder, we provided a detailed reconciliation from net loss attributable to stockholders to non GAAP adjusted EBITDA in our earnings press release. As of March 31, 2023, the company had cash and cash equivalents of was $15,300,000 compared to $10,200,000 as of December 31, 2022.

Speaker 2

Cash used from operations for the 1st 3 months of 2023 was $1,900,000 compared was $4,500,000 in the 1st 3 months of 2022, driven primarily by the year over year improvement in our net loss and improvements in working capital efficiency. Now turning to a review of our 2023 financial guidance, which we updated in our earnings press release today. For the 12 months ending December 31, 2023, we now expect totaled revenue in the range of $59,000,000 to $62,000,000 representing growth of approximately 33% to 39% year over year. This compares to our prior range of $58,000,000 to $61,000,000 or growth of 30% to 37% year over year. Our total revenue guidance range now assumes Advanced Energy revenue in the range of $51,000,000 to $54,000,000 representing growth of approximately 39% to 47% year over year.

Speaker 2

This compares to our prior range of $50,000,000 to $53,000,000 representing growth of approximately 36% to 44% year over year and OEM revenue was $8,000,000 representing growth of approximately 4% year over year, which is unchanged versus our prior guidance assumption. In terms of our profitability guidance for the full year 2023, we now expect net loss attributable to stockholders of approximately $10,500,000 compared to our prior guidance of approximately $14,000,000 The improvement in our expected net loss for 2023 is driven by the expected gain on sale from our sale leaseback transaction of approximately $2,800,000 as well as the flow through of better than expected revenue and profitability results in the Q1. Our formal financial guidance for 2023 incorporates the following considerations for modeling purposes. First, we expect gross margins of approximately 65.5% to 66.5% this year compared to 65% in 2022. We continue to expect tailwinds to our gross margin as our revenue mix favors the Advanced Energy segment and our U.

Speaker 2

S. Growth exceeds growth in sales to customers outside the U. S. We also expect continued margin tailwinds related to our product mix within our Advanced Energy segment. These tailwinds are expected to be partially or fully offset by year over year headwinds related to raw materials inflation, changes in foreign currency exchange rates against the U.

Speaker 2

S. Dollar and to a lesser extent incremental rent expense related to our recent sale leaseback transaction. 2nd, we expect the change in our operating expenses to range from flat to 5 $4,000,000 in 2023. This compares to our prior guidance, which assumes total other expense net of approximately $1,400,000 The change in expectations for total other income versus our prior guidance is a result of the expected gain of $2,800,000 from our sale leaseback transaction in the 2nd quarter, which was not contemplated in our prior guidance. Total other income net in 2023 continues to assume net interest of approximately $1,700,000 as well as a gain of approximately $350,000 and our other income loss line related to the lapse of the statute of limitations on our joint and several payroll liability.

Speaker 2

4th, we now expect non controlling interest of approximately $150,000 compared to $125,000 previously. And lastly, our guidance for 2023 continues to assume an income tax benefit of approximately $2,200,000 non cash depreciation and amortization of approximately $700,000 non cash stock based compensation expense of approximately we anticipate total revenue in the range of $14,200,000 to $15,000,000 driven by an increase in Advanced Energy sales in the range of approximately 53% to 63% year over year, partially offset by a decrease in OEM sales of approximately 27% year over year. Lastly, our formal guidance for 2023 now assumes we end the year with approximately $20,000,000 in cash and cash equivalents on our balance sheet as of twelvethirty onetwenty 23. The cash projection for year end 2023 includes a number of key assumptions and discrete items to bear in mind when evaluating our financial condition. First, we expect normalized cash used in operating and investing activities of approximately $12,500,000 in 2023 as compared to our prior guidance of $14,500,000 The $2,000,000 improvement in normalized cash used in operating investing activities is driven primarily by the roughly $700,000 of better than expected profitability in Q1 and a $1,200,000 decrease in expected use of cash and working capital.

Speaker 2

2nd, our cash projection for year end 2023 continues to include also a one time benefit to working capital of $7,500,000 related to the tax refund discussed earlier and a one time benefit to cash flow from investing activities of $6,600,000 related to our sale leaseback transaction. And lastly, our cash projection for year end 2023 continues to include the $8,100,000 of net proceeds from tranche 1 of our term loan and continues to assume no additional borrowings on either the term loan or revolver in 2023. With that, I'll turn the call back to Charlie for closing remarks.

Speaker 1

Thanks, Tara. In summary, we're pleased with our strong start to 2023 from both a financial and operational perspective. Given the performance and progress achieved by our team during Q1, we are raising our full year revenue guidance and now expect to deliver revenue growth in sales of our advanced energy products of 39% to 47% year over year. With multiple tailwinds to our growth, including the 4, 510 clearances we've secured over the last 12 months and the most recent update made to the safety communication as well as the commercialization of our APeX-one console, We continue to expect strong contributions from improving generator and handpiece sales in the U. S.

Speaker 1

Along with improving handpiece trends internationally as we progress through 2023. Based on the latest industry data, we estimate the market opportunity for Renuvion technology in the cosmetic surgery market is nearly $3,000,000,000 in the U. S. In loan, including an annual opportunity in excess of $700,000,000 based on the number of procedures performed each year. Looking ahead, we remain committed to maximizing the potential growth opportunity in front of us by educating the U.

Speaker 1

S. In the cosmetic surgery market, supported by our direct to consumer marketing and our clinical support by our medical affairs team and empowering our international distribution partners to do the same, while delivering progress with respect to our remaining strategic initiatives for 2023. 1st, to enhance our Renuvion product portfolio by bringing new technologies like our APeX-one console to the market second, to expand our portfolio of clinical evidence supporting the use of our products and third, to manage our expenses and drive progress towards profitability. By doing so, we will continue to establish Renuvion as the leading technology for our targeted indications, bringing innovation to the global cosmetic surgery market for the benefits of all of our stakeholders. In closing, I'd like to thank our employees and distributors for their efforts and achievements during the Q1, as well as our customers, investors and those on today's call for their support.

Speaker 1

With that, operator, let's now open the call for questions.

Operator

Thank we do ask that you limit yourself to one question and one follow-up. Into the queue. Our first question comes from the line of Matthew O'Brien with Piper Sandler. Please proceed with your question.

Speaker 3

Good morning. Thanks for taking my question. Just maybe Charlie for starters on the guide for the year, obviously, Good uptake of the new generation. But there's a pretty steep ramp still throughout the course of the year. I know you've got all the But again, there's a lot of reeducation that's going to need to go on.

Speaker 3

So can you just talk a little bit about your confidence in getting to the full year guide? And maybe bear within that Question, talk maybe a little bit about April, if you don't mind, as far as what you're seeing that gives you the confidence to push on the Q2 side.

Speaker 1

Yes. Thanks, Matt. I appreciate the question. And just so you know, we are very confident in our ability to deliver are growth of at least 39% and for a few reasons. The first is the recent 510 clearances and the FDA update to the safety communication, which we believe addresses the remaining issues of the safety communication from March of 2022.

Speaker 1

And secondly, as I mentioned before, the commercialization of our APeX-one generator, which has already demonstrated its ability to contribute to our growth in 2023. And it is a really nice console and a really nice machine and It's being received very well by both existing and new customers in the U. S. And then 3rd is that we, for the first time, get to tell this story because of all the 510s that we've obtained. And we're still in the early innings of the commercial of the direct to consumer launch, but that launch is going to pay dividends for us as we continue to go through the rest of this year.

Speaker 1

And so and we continue to expect, especially on the handpiece side of things, things To get better now outside of the United States for the rest of the year also. And all this was already factored into our guidance that we gave at the beginning of the year. And so things are going to how we planned. They're just a little bit better than how we planned, and that's how we raised guidance. In regard to April, I appreciate the question, but we're not going to start talking about monthly trends in here.

Speaker 1

It's all factored into Our guidance that we gave through the rest of the year and it's something that we're very comfortable with.

Speaker 3

Okay. And so the follow-up question is on the U. S. Obviously, the most important of the geographies at this point. Can you talk about just some of the early conversations you're having with clinicians that may have been big renewing on you just Slow down post the safety notice.

Speaker 3

And just maybe frame up the opportunity like Those guys had reduced their utilization by 50%, 60%, and we're already starting to hear about them getting back to You know, or thinking about getting back to 100% or 105% and things like that, on the handset side of things. Thank you. Yes.

Speaker 1

I appreciate the question. Remember, especially in the U. S. That we did an incredible job. The team did phenomenal job of retaining a lot of the in fact almost all of the existing customers.

Speaker 1

And From a handpiece point of view and from a utilization point of view, it was affected, but it wasn't affected nearly as The generator side of things. And so now with the latest indication that we have for use after liposuction, We are actually the only cleared device to be used after liposuction and body contouring procedures. And so if we have people that did slow down or aren't using it as much, it's obviously an opportunity for us to go back in there and Talk to them about that because now if they want to use a clear device for that, we are the only game in town. And secondly, with new prospects and potential new customers that will come on and drive utilization that this is the only clear device for them also. Also with that, from a utilization Point of view, the other large driver of utilization in the U.

Speaker 1

S. Specific is the This is Me campaign and the direct to consumer approach that will drive consumers to the doctor's office to ask them for Renuvion technology, which will not only drive incremental usage, It will also drive doctors that don't have the technology to acquire the technology. And so Those are all of the dynamics, especially in the U. S. That are that we're facing now through the end of the year.

Speaker 1

And our guidance has always contemplated all of those things. It's just now it's we raised it by $1,000,000 based on the beat we had in Q1.

Speaker 3

Got it. Thank you.

Operator

Thank you. Our next question comes from the line of Matt Hewitt with Craig Hallum Capital Group. Please proceed with your question.

Speaker 4

Good morning and congratulations on the strong quarter both from And a regulatory standpoint. Maybe first question regarding the safety communication. So that got updated yesterday afternoon. What has been or what's been the feedback from your OUS distributors and customers? Have you been hearing from them that, hey, as soon as you've got this Resolved, we're going to be back buying more, or maybe help us understand kind of what that OUS ramp could look like now that this is resolved?

Speaker 4

So Matt, you got to

Speaker 1

let me breathe here for a second. We didn't get the update till 3 o'clock in the afternoon yesterday and most of our OUS Distributors are in bed and then I'm doing this this morning. So at least give me a second to figure all of that stuff out. But What our guidance assumes, our guidance assumes for the rest of the year in there is that we would have some stronger utilization trends as the year progresses, but it really doesn't assume a huge pickup in new generator sales outside the U. S.

Speaker 1

And the reason for that is just as there was some lag When we got the safety notice outside of the U. S, we just need time to see what is actually going to happen outside the U. S. And so We can give an update later, but I don't have anything for you to answer that question at this point in time just because It's so new.

Speaker 4

Understood. And then as far as the increase in guidance, you've provided a little bit of color here, but What kind of visibility do you have, particularly on the generator side? Do you have obviously, you're going to have a pipeline in your funnel, But do you have are you kind of working off of a backlog? Do you have 6 month visibility, 9 month visibility? Just help us understand how your I guess maybe another way to ask about the comfort with your guidance question.

Speaker 1

Yes. So look, We've got all the forecasts for the sales organization in the U. S. They give basically a yearly forecast And then it's updated obviously every quarter. And so we've got insights into that as far as what we think our pipeline is for new customers.

Speaker 1

And then remember that I mentioned too is what we did not know when we launched the APeX-one 1 is what the uptick would be initially on upgrading existing customers. And if you look at the majority of the beat that we had, that was on upgrading our existing customers. And so we would expect that to continue throughout the rest of the year. Plus, we did do better than our guidance had previously expected on bringing on new customers in the U. S.

Speaker 1

And that was also previously factored into our guidance also. So the visibility that we got is the visibility that we've always had. The part of it that is a little bit new is the upgrade ability for our new customers.

Speaker 4

Got it. And then maybe one last one here and then I'll hop back in the queue. But regarding gross margin, so you did provide a little bit of a discount as a way to encourage Customers to upgrade to Apex 1, how much of an impact, if any, was that on gross margins in the quarter? And are you kind of expecting that over the course of this

Speaker 1

Yes. So if you're looking at What the cause was for gross margins to be a little bit lower in Q1. It didn't have anything to do with the upgrades per se. It had more to that OEM was so strong and that that was a larger portion than we had anticipated for that. As far as the upgrade price and the upgrades that we are giving, that's all contemplated and what we're doing and how we're moving forward.

Speaker 1

So, it was really had to do the difference in gross margins really had to do with OEM and then mix within the advanced energy category.

Speaker 4

Got it. Great. Thank you.

Speaker 3

Yeah.

Operator

Thank you. We'll pause a moment to allow for any other questions. Thank you. We are currently showing no remaining questions at this time. That does conclude our conference for today.

Operator

Thank you for your participation.

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Earnings Conference Call
Apyx Medical Q1 2023
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